7. Stock-Based Compensation Plans

Stock options are granted with exercise prices not less than the fair market value of our common stock, par value $.01 per share (“Common Stock”), at the time of the grant, with an exercise term as determined by the Committee administering the applicable option plan (the "Committee") not to exceed 10 years. The Committee determines the vesting period for the Company's stock options. Generally, such stock options have vesting periods of immediate to four years. Certain option awards provide for accelerated vesting upon meeting specific retirement, death or disability criteria, and upon change of control. During the years ended June 30, 2013 and 2012, the Company granted options to purchase 357,000 and 233,750 shares of the Company's Common Stock, respectively.

Compensation expense is recognized in the general and administrative expenses line item of the Company's consolidated statements of operations on a straight-line basis over the vesting periods. There are no capitalized stock-based compensation costs at June 30, 2013 and 2012. As of June 30, 2013, there was approximately $1,185,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements to be recognized over a weighted-average period of 2.9 years.

Cash received from the exercise of stock options for the years ended June 30, 2013 and 2012 was $369,646 and $3,187, respectively. Cash flows from tax benefits attributable to tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as financing cash flows. The intrinsic value of stock options exercised during the year ended June 30, 2013 aggregated approximately $488,000.

The weighted average fair value at date of grant for options granted during the years ended June 30, 2013 and 2012 was $3.04 and $1.75 per share, respectively. The fair value of options at date of grant was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

	2013			2012
Risk-free interest rates		2.5	%		3.4	%
Expected option life in years		6.5			6.5
Expected stock price volatility		75.15	%		75.44	%
Expected dividend yield		0	%		0	%

The risk free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The expected option term is based upon the number of years the Company estimates the option will be outstanding based on historical exercises and terminations. The expected dividend yield is based upon historical and projected dividends. The Company estimates volatility based upon historical price changes of the Company’s stock over a period equal to that of the expected life of the option.

In March 1996, the Board of Directors adopted and, in February 1997, the shareholders approved the 1996 Employee Incentive Stock Option Plan covering an aggregate of 450,000 shares (the "1996 Plan") and the 1996 Non-Employee Director Stock Option Plan (the "1996 Directors Plan") covering an aggregate of 1,125,000 shares of Common Stock. At June 30, 2013, options to purchase 41,000 shares were outstanding under the 1996 Plan at exercise prices ranging from $5.18 to $7.60 per share with a vesting period of immediate to three years and options to acquire 105,000 shares were outstanding under the 1996 Directors Plan at exercise prices ranging from $4.99 to $7.60 per share with a vesting period of immediate to three years. At June 30, 2013, options to purchase 138,295 shares under the 1996 Plan have been exercised and options to purchase 422,650 shares have been forfeited (of which options to purchase 182,945 shares have been reissued). There are no shares available for future grants. At June 30, 2013, options to purchase 838,500 shares under the 1996 Directors Plan have been exercised and options to purchase 115,000 shares have been forfeited (of which none have been reissued). There are no shares available for future grants.

In October 1998, the Board of Directors adopted and, in January 1999, the shareholders approved the 1998 Employee Stock Option Plan (the "1998 Plan") covering an aggregate of 500,000 shares of Common Stock. At June 30, 2013, options to purchase 14,750 shares were outstanding under the 1998 Plan at exercise prices ranging from $3.45 to $7.60 per share with a vesting period of immediate to three years. At June 30, 2013, options to purchase 72,848 shares under the 1998 Plan have been exercised and options to purchase 477,677 shares under the 1998 Plan have been forfeited (of which options to purchase 65,275 shares have been reissued). At June 30, 2013, there were no shares available for future grants.

In October 2000, the Board of Directors adopted and, in February 2001, the shareholders approved the 2001 Employee Stock Option Plan (the "2001 Plan") covering an aggregate of 1,000,000 shares of Common Stock. At June 30, 2013, options to purchase 400,730 shares were outstanding under the 2001 Plan at exercise prices ranging from $1.82 to $8.00 per share with a vesting period of one to four years. At June 30, 2013, options to purchase 176,256 shares under the 2001 Plan have been exercised and options to purchase 674,275 shares under the 2001 Plan have been forfeited (of which 251,406 options have been reissued). At June 30, 2013, there were no shares available for future grants.

In September 2005, the Board of Directors adopted and, in December 2005, the shareholders approved, the 2005 Employee Equity Incentive Plan (the "2005 Plan") covering an aggregate of 500,000 shares of Common Stock and the 2005 Non-Employee Director Stock Option Plan (the "2005 Directors Plan") covering an aggregate of 200,000 shares of Common Stock. At June 30, 2013, options to purchase 427,700 shares were outstanding under the 2005 Plan at exercise prices ranging from $.85 to $6.18 per share with a vesting period of four years. At June 30, 2013, there were 65,675 options exercised under the 2005 Plan and options to purchase 47,750 shares have been forfeited (of which 41,125 options have been reissued). At June 30, 2013, 6,625 shares were available for future grants under the 2005 Plan. At June 30, 2013, options to purchase 195,000 shares were outstanding under the 2005 Directors Plan at exercise prices ranging from $2.41 to $5.42 with a vesting period over three years. At June 30, 2013, there were no options exercised and 5,000 shares were available for future grants under the 2005 Directors Plan.

In December 2009, the Board of Directors and shareholders adopted the 2009 Employee Equity Incentive Plan (the "2009 Plan") covering an aggregate of 500,000 shares of Common Stock and the 2009 Non-Employee Director Stock Option Plan (the "2009 Directors Plan") covering an aggregate of 200,000 shares of Common Stock. At June 30, 2013 options to purchase 425,811 shares were outstanding under the 2009 Plan at exercise prices ranging from $1.82 to $6.18 per share with a vesting period of four years. At June 30, 2013, there were 11,089 options exercised and options to purchase 67,525 shares were forfeited under the 2009 Plan. At June 30, 2013, there were 63,100 shares available for future grants under the 2009 Plan. At June 30, 2013 options to purchase 120,000 shares were outstanding under the 2009 Directors Plan at exercise prices ranging from $2.41 to $6.71 with a vesting period of four years. At June 30, 2013 there were no options exercised or forfeited under the 2009 Directors Plan. At June 30, 2013, there were 80,000 shares available for future grants under the 2009 Directors Plan.

In December 2012, the Board of Directors and shareholders adopted the 2012 Employee Equity Incentive Plan (the “2012 Plan”) covering an aggregate of 500,000 shares of Common Stock and the 2012 Non-Employee Director Stock Option Plan (the “2012 Directors Plan”) covering an aggregate of 200,000 shares of Common Stock. At June 30, 2013, there were no options outstanding, exercised, or forfeited under the 2012 Plan. At June 30, 2013, 500,000 shares were available for future grants under the 2012 Plan. At June 30, 2013, there were no options outstanding, exercised, or forfeited under the 2012 Directors Plan. At June 30, 2013, 200,000 shares were available for future grants under the 2012 Directors Plan.

The selection of participants, allotments of shares and determination of price and other conditions relating to options are determined by the Board of Directors or a committee thereof, depending on the Plan, and in accordance with Rule 4350(c) of the Corporate Governance Requirements applicable to Nasdaq-listed companies. Incentive stock options granted under the plans are exercisable for a period of up to ten years from the date of grant at an exercise price which is not less than the fair market value of the Common Stock on the date of the grant, except that the term of an incentive stock option granted under the plans to a shareholder owning more than 10% of the outstanding Common Stock may not exceed five years and its exercise price may not be less than 110% of the fair market value of the Common Stock on the date of grant. Options shall become exercisable at such time and in such installments as provided in the terms of each individual option agreement.

The following table summarizes information about stock option activity during 2013 and 2012:

	Options
					Weighted
					Average
			Weighted		Remaining
	Number		Average		Contractual		Aggregate
	of		Exercise		Life		Intrinsic
	Shares		Price		Years		Value
Outstanding as of June 30, 2012		1,820,930	$	3.60
Granted		357,500		3.83
Exercised		(150,964)		2.45
Forfeited		(95,775)		2.41
Expired		(201,700)		5.10
Outstanding as of June 30, 2013		1,729,991	$	3.65		5.4	$	2,937,132
Vested and exercisable at June 30, 2013		1,104,817	$	3.97		3.6	$	1,554,007

Outstanding as of June 30, 2011		1,795,415	$	4.06
Granted		233,750		2.19
Exercised		(3,750)		.85
Forfeited		(1,000)		2.13
Expired		(203,485)		6.07
Outstanding as of June 30, 2012		1,820,930	$	3.60		5.7	$	241,414
Vested and exercisable at June 30, 2012		1,243,868	$	4.03		4.7	$	96,426

The following table summarizes information about stock options outstanding at June 30, 2013:

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
Range of			Contractual		Average				Average
Exercise			Life		Exercise				Exercise
Prices	Number		(Yrs.)		Price		Number		Price
$0.85-2.96		1,007,661		7.1	$	2.35		478,787	$	2.20
$3.45-4.99		273,000		3.0	$	4.50		273,000	$	4.50
$5.18-8.00		449,330		3.3	$	6.04		353,030	$	5.98
		1,729,991		5.4	$	3.65		1,104,817	$	3.97

As of June 30, 2013 and 2012, 1,729,991 and 1,820,930 shares are reserved for issuance under outstanding options and 854,725 and 433,950 shares are reserved for the granting of additional options, respectively. All outstanding options expire between September 2013 and September 2021 and vest over periods of up to four years.